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Friday, May 14, 2010

Elliott Wave Update ~ 14 May

[Update 7:25PM: The market, having no serious restrictions yet placed on it, is like a bucking bronco.  The sheer volume and amount of leverage and credit/money flows in and out of all kinds of asset classes is something to behold. There has definitely been a sea change versus any other pullback since the March 2009 low. That to me is evidence that we have started Primary wave [3] down of Cycle wave c of Supercycle wave (a) in the Great Bear.

A grinding market this is not so far since the peak. More like whipsaw city. To be whipped in just the start of a major decline has to be unnerving the Plunge Protection Team.  They will probably act, and act soon, on some perceived fix to stop the bronco from bucking so much. A short ban in certain asset classes? Maybe. But certainly the new circuit breaker  rules may be tighter.  Who knows what they will do with the HFT machines. If they unplug them there indeed will not be the liquidity we have now and it will grind slower probably but with great air pockets below blowing CB's along the way.  So I doubt they unplug the machines. They simply cannot because the old MM system has been marginalized and run out of town in many instances and put out to pasture.

My anticipation of the first serious interventions leaves me guessing as to what effect it will have on the wave structure.  But at any rate in the long run it will not matter as they are boxed in on what they can do.

The PPT runs a great risk by changing anything. Imagine having the CB's blow every other week at least once. Wouldn't that unnerve the Warren Buffett diehards left in the market?

No they cannot keep the market from going where it wants to go.  In other words, social mood cannot be governed nor influenced. Mankind is in a bear market as it is nature's way of correcting massive imbalances that have built up over decades.  Its like a great forest fire that is meant to replenish nature although temporarily it destroys. Same with floods that replenish the great banks of a river and give it nutrients and life.

So is a bear market. It will expose the fraud, help fetter out the corrupt and renew the business cycle and get rid of the rot and bad credit. Yet our governments have tried to deny its natural course. There can be only one outcome: The whole financial system will blow up.]

The primary count is that a wave (i) of [i] of 3 down has occurred today. However I do expect a rally Monday based on today's end of day reversal.  How much it rallies will of course help determine if wave 2 is over or not. There are a few things that bug me about calling wave 2 over:

1)  Indexes never bothered to touch into my blue box retrace area.
2) NYMO never made it to near zero.
3) Dollar has now  arguably nearing a wave (1) peak and there is a good chance the market will rally on a falling dollar (or more likely a rallying Euro which is oversold to say the least.)
4) Sentiment and short term oversold factors.
5) Europe might need to rally some more.

So we are at a crossroads a bit and my primary count is still a wave 2 but I am forced to concede that there is a possibility that a premature call for wave 2 being over.

Monday/Tuesday is a key day obviously.  A relief rally can go back toward 1150-1158. A break back above 1158 could indicate wave 2 is not yet over and that it will go higher to 1175 or more perhaps.
Today was some nasty down volume and such but the end of the day was a bit of a reversal.
Here is the bottom line: If EWI calls for lower lows come next week in tonight's STU (which they surely will), count on us going to 1175 SPX or more.  Its just their luck so its a possibility based on how Monday plays out.
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